Statutory Purpose. The statutory purpose for leased access regulation is “to promote competition in the delivery of diverse sources of video programming and to assure that the widest possible diversity of information sources are made available to the public from cable systems in a manner consistent with growth and development of cable systems.” 47 U.S.C. §532(a).

Amount of Set Aside. Congress established leased access set-aside requirements in proportion to a system’s total activated channel capacity. Cable operators with fewer than 36 channels must set aside channels for commercial use only if required to do so by a franchise agreement in effect as of the enactment of Section 612. Operators with 36 to 54 activated channels must set aside 10 percent of those channels not otherwise required for use or prohibited from use by federal law or regulation. Operators with 55 to 100 activated channels must set aside 15 percent of those channels not otherwise required for use or prohibited from use by federal law or regulation. Cable operators with more than 100 activated channels must designate 15 percent of such channels for commercial use. Cable operators are not required to remove services that were being provided on July 1, 1984, in order to comply with the statute. 47 U.S.C. §§ 532(a), 532(b)(1).

Other Uses. In accordance with the statute and the Commission’s rules, cable operators may use any unused channel capacity designated for leased access until an unaffiliated programmer obtains use of the channel capacity pursuant to a written agreement. 47 U.S.C. § 532(b)(4) Cable operators may use up to 33 percent of the channel capacity designated for leased access for qualified minority or educational programming sources, whether or not the source is affiliated with the cable operator. 47 C.F.R. § 76.977.

Reasonable Conditions. Cable operators may impose reasonable insurance requirements and must provide the minimal level of technical support necessary for users to present their material on cable systems. 47 C.F.R. § 76.971(d); 47 C.F.R. § 76.971(c) Cable operators may not unreasonably refuse to cooperate with a leased access user in order to prevent that user from obtaining channel capacity. 47 C.F.R. § 76.971(c).

Indecent Programming. A cable operator may adopt and enforce prospectively a written and published policy of prohibiting programming that, it reasonably believes, describes or depicts sexual or excretory activities or organs in a patently offensive manner as measured by contemporary community standards and may refuse to transmit any leased access program or portion of a leased access program that the operator reasonably believes contains obscenity, indecency or nudity. 47 C.F.R. § 76.701.

Leased Access Rates. In 1997, the Commission adopted a maximum rate formula for full-time carriage on programming tiers based on the “average implicit fee” that non-leased access programmers are implicitly charged for carriage, an amount that permits a cable operator to recover its costs and earn a profit. This fee is prorated for part-time programming. The Commission also adopted a maximum rate for a la carte services. See 47 C.F.R. §§ 76.970 - 76.977 (October 2007 edition).

The current formula for calculating a full-time leased access channel rate is:

Formula:

Total Eligible Tier Monthly Subscriber Revenue – Total Eligible Tier Monthly Programming Costs x (Subscriber-Channels for Elected Tier/Total Subscriber-Channels for all Eligible Tiers) / Number of Channels on Elected Tier = Maximum Full-time Rate Per Month

Where:

Subscriber-Channels = Number of subscribers x number of channels

Eligible Tier = Each tier with subscriber penetration over 50 percent

Elected Tier = Tier chosen for channel placement

Example:

Cable company has 2 eligible tiers with a total subscriber count of 10,000 and a total channel count of 20. The elected tier has 5,000 subscribers and 10 channels. Monthly subscriber revenue for both eligible tiers is $50,000 and monthly programming costs are $40,000.

In the event of an agreement to lease capacity on a tier with less than 50 percent penetration, the average implicit fee should be determined on the basis of subscriber revenues and programming costs for that tier alone.

Formula:

Total Elected Tier Monthly Subscriber Revenue – Total Elected Tier Monthly Programming Costs / Number of Channels on Elected Tier = Maximum Full-time Rate Per Month

Example:

The elected tier has a subscriber count of 10,000 and a channel count of 20. Monthly subscriber revenue for the elected tier is $50,000 and monthly programming costs are $40,000.

The license fees for affiliated channels used in determining the average implicit fee shall reflect the prevailing company prices offered in the marketplace to third parties. If a prevailing company price does not exist, the license fee for that programming shall be priced at the programmer's cost or the fair market value, whichever is lower. The average implicit fee shall be based on contracts in effect in the previous calendar year. The implicit fee for a contracted service may not include fees, stated or implied, for services other than the provision of channel capacity (e.g., billing and collection, marketing, or studio services).

Independent Accountant. Under the Commission’s rules currently in effect (October 2007 CFR edition), persons alleging that a cable operator's leased access rate is unreasonable must receive a determination of the cable operator's maximum permitted rate from an independent accountant prior to filing a petition for relief with the Commission. 47 C.F.R. § 76.975 (b)

** On February 1, 2008, the Commission released a Report and Order modifying its leased access rules and procedures. In the Matter of Leased Commercial Access, Report and Order and Further Notice of Proposed Rulemaking, 23 FCC Rcd 2909 (2008). This Report and Order was stayed by the U.S. Court of Appeals for the Sixth Circuit and is not in effect. The proceeding remains open.**

Court Decisions.

Time Warner Entertainment Co., L.P. v. FCC, 93 F.3d 957, 969 (1996).

ValueVision, Inc. v. FCC, 149 F.3d 1204 (D.C. Cir. 1998).

For more information pertaining to the Policy Division, please call: (202) 418-2120.

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